Oh what change was promised after the shock of the Lehman Brothers’ collapse
five years ago this weekend.

Bankers would be punished and reformed, the politicians promised. Economies would be rebalanced, deficits would be closed and debts would be reduced. But oh, how few of these promises have been delivered. Barack Obama’s campaign slogan of “yes we can” has turned into a collective “no we can’t”.

One aspect of this supposed failure is plainly the absence of serious financial reform. This is what most seems to concern commentators when writing about the legacy of the Lehman crisis.

Banks are accused of an effective lobbying campaign to neuter the reform agenda and carry on as before; it’s now back to business as usual. But, up to a point, a business as usual banking sector is precisely what we most need.

The economy won’t start functioning properly again until the banks resume their normal role of money creation and credit expansion. Much of the reform agenda has run counter to this purpose.

The time for ratcheting up capital and liquidity requirements is not in the depths of a depression, when it only deepens the deleveraging process, but in the good times once the economy has returned to health, and undue exuberance needs to be reined in. In the bad times, you have to do the opposite, perversely, of what you wish you had done in the good. So in this sense, business as usual is just what the doctor ordered.

Banks are mere conduits for wider macroeconomic events and developments, and it is perhaps on this front that the absence of change is at its most striking.

OK, so let’s not over-egg the idea of quiet continuity too much. There are some things which very obviously have changed. Scarcely anyone would have predicted, when interest rates were dramatically slashed close to zero, that this is where they would still be five years later. If the Governor of the Bank of England is to be believed, they won’t start rising again for at least another three years. Such a prolonged period of zero interest rates is without historical precedent, in Western economies at least.

The other thing that’s changed is that Western governments have seen deficits and debts surge. This has indeed happened before, but in the past the phenomenon has nearly always been associated with major wars. The debt burden then naturally subsides with demilitarisation and return to normal economic activity.

There appear to be few precedents for it happening in peacetime, and none whatsoever for it happening at a time of such rapid demographic change, where pressure on the public finances from ageing populations limits the scope for debt pay-down when economic conditions improve. We therefore cannot count on similar relief.

What’s more, the policy response to the crisis has made many of the underlying causes of the implosion worse, not better. True enough, there has been little or no credit expansion in Western economies since the Lehman collapse. To the contrary, households, businesses and banks have quite substantially reduced their leverage.

But in today’s world, you have to look at the global picture, not the narrow domestic one, and across the world economy as a whole, there has been a substantial, and continued rise in credit.

This is particularly evident in China, where credit expansion since the collapse of Lehman makes what happened in the US in the run-up to the sub-prime crisis look positively pedestrian.

Banks may now be better regulated, but finance obeys the waterbed principle; squash it down in one area, and it merely rises up in another. The Western banking crackdown has supported substantial growth in off-balance sheet, shadow banking, again especially in China and the rest of Asia.

By common agreement, the cause of the financial crisis was too much debt. The mirror image of too much debt is too much saving. Quantitative easing has further expanded the savings glut, making the problem worse than ever.

Today’s misallocation of excess capital is not in US sub-prime housing, but prime property in central London and other major international cities, over-investment in China, and unsustainable growth in once fashionable emerging markets.

The bottom line is that very few, if any, of the primary causes of the crisis have been properly addressed; they have merely been papered over. Trade imbalances within the eurozone and between America and China have admittedly got better, but only to be replaced by different manifestations of the same underlying problem.

Spain and even Greece have now closed once yawning current account deficits, but only by allowing unemployment to climb to unprecedented levels, thereby collapsing internal demand. This is not a problem solved, but merely transformed.

Is the world a safer, reformed place as a result of the five years that have elapsed since the Lehman implosion? In the sense that bankers are more risk averse and constrained, possibly yes, but in terms of the underlying faultlines that created the crisis in the first place, no; these are now worse. This rolling crisis is not yet over, not by a long chalk.